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files a 14A
asking investors to approve a 4:1 stock split at the company's March 20 shareholder meeting. Shares
AH after closing near their all-time high. "The Board ... believes the considerable price appreciation has made our common stock less affordable and, therefore, attractive to fewer investors," Salesforce declares, apparently with a straight face.
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The conventional thinking on this type of move is that (a) investors who avoid expensive stocks (because they want to buy lots in 100 share multiples) will start buying VERSUS (b) people who've held this stock but don't want to break up their 100 share unit will be able to sell and extract some gains. But this stock is almost 110% big investor owned (100% plus half of the sort selling). So, my opinion is that this means nothing in an economic analysis but is part of (
) Benioff's constant buzz to push the stock's momentum. Watch the stock go up and my poor Put options tank. Dang!!
Jan 27, 2013. 03:39 PM
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Salesforce.com: The Short Of 2013
I agree that this stock is overvalued. But Benioff is such a master talker, I find it difficult to expect a drop (although I have Put options currently despite losing money on CRM Puts before). Example: the latest (3rd) quarter showed a number of negative results but Mad Cramer called it a blowout after his interview with the CEO, even claiming that Benioff had given Cramer valuable insights into CRM's new accounting.
The big negatives from my jaundiced perspective include (1) the one-time charge of 149.1 million due to inability to project when CRM can use much of its tax loss carry-forward - charged against quarters before the 3rd quarter and thus the one-time nature; (2) an additional charge of 25.9 million for the 3rd quarter; (3) the increase of Stock-Based Expenses (the use of stock to pay for part of its Cost of Revenues and part of its Expenses) increased to 13% of Revenues (the 4th straight quarter where SBE was more than 10% of Revenues); (4) Stock-Based Expenses accounted for essentially ALL of the highly touted Operating Cash Flow; and (5) this was the 4th straight quarter where Interest Expense was greater than Interest Income.
But Benioff has his publicity machine rolling and I suspect I'll lose on the Puts I have now.
Jan 25, 2013. 11:57 AM
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How to Be Sane In An Insane Investment Climate
I have been looking at several of CRM's financial statements. The steady growth in annual cash flow from operations (and the non-GAAP earnings) are maintained by quickly increasing what salesforce.com calls Stock Based Expenses, which are expenses and costs of revenues paid for with stock. The portion of expenses and costs of revenues paid for with stock is also added back in the Cash Flow from Operations. Consider the most recent quarterly report: Cash Flow from Operations was reported at 105.9 million while the Stock Based Expenses line was 105.1 million.
In other words, essentially all of the latest quarter's cash flow from operations came from a Financing activity; that is, the sale of stock to employees (subject to a minimum holding period). The upcoming annual report in February should be the first where the annual cash flow from operations is more than 50% attributable to expenses and costs paid for with new stock. (This ratio was 39% last year and 26.2% the prior year.)
Jan 11, 2013. 03:14 PM
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